Why counterfeit bags are BAD - a guide.

Counterfeit Bags May Have Links To Organized Crime, Terrorism Kate Spade's Attorney Going After House Parties

A six-month 12 news undercover investigation found the hottest trend in home parties may have serious consequences.

WISN 12 News Investigative reporter Colleen Henry had no idea when she started the undercover investigation into purse parties and fake designer handbags that it would take such a serious twist and doubts the women, who've made a business of selling counterfeit chic, have any idea what kinds of violence the sale of these fake bags might be funding.

"Lots of women buying, very excited to be going through all these purses," 12 News producer Susan MacDonald said.

For six months, 12 News investigated the purse party phenomenon and finally went undercover when it couldn't score a formal invitation for the TV cameras.

MacDonald went to three parties -- from a nearly $500,000 Fox Point home to a Elm Grove strip mall to a $250,000 ranch house in Brookfield.

While a real Kate Spade will cost you $150 to $300, a purse party fake is just $30 to $60 -- cash only please...

"At those prices, the bags and bag ladies fly out the door," Henry said.

"The problem is enormous, and why is the problem enormous? Because there is demand, and where there is demand, there's supply," Kate Spade attorney Barbara Kolsun said.

Kolsun is the woman the New York Times dubbed the pit bull of the fake fashion police. She is the trademark attorney for handbag designer Kate Spade. She said the company's No. 1 problem now is the purse party.

"I just met with all of my investigators countrywide here Tuesday in our offices and they asked me what's your No. 1 priority for us for the year ahead, and I said, 'House parties, arrest those little ladies at house parties,'" Kolsun said.

Kolsun estimated for every real Kate Spade sold, there's a fake Kate Spade on the street.

Buying the fake bags isn't illegal, but selling them is. The designer label is protected by federal and state law. In other words, hustling counterfeit handbags is a crime that could cost you federal time.

"We're here to talk to you about your handbags," Henry said to the woman that sells the bags out of an Elm Grove strip mall.

Kate Spade's Kolsun said most purse party ladies get their goods either in New York's Chinatown or in Los Angeles' garment district. Counterfeit couture is their stock in trade and the vendors are fully aware it's illegal.

Blocks and blocks of fake handbags line Chinatown's streets, Henry said. Women from across the country come to buy in bulk.

In Chinatown, Henry found a Kate Spade for $16. It was the same bag MacDonald paid $44 for at a Brookfield purse party.

"This is a $2 bag and you paid $44 for it in cash and you don't know where that cash went," Kolsun said.

Kolsun said where that cash goes is the dirty little secret behind the purse party.

Federal investigators have traced the proceeds from the Chinatown counterfeits to a dangerous underground economy -- an economy thriving on sales to purse party dealers from America's nicest neighborhoods.

They support guys with names like Sammy Meatballs, Mike the Russian and Frankie the Fish, Henry reported.

Two years ago, federal prosecutors indicted more than 70 members of New York's Genovese crime family for a number of racketeering offenses, including trafficking in counterfeit handbags.

Even more frightening was evidence developed by the FBI's joint terrorism task force that the sale of counterfeit goods financed the 1993 World Trade Center bombing.

The U.S. Customs Service continues to warn that counterfeit designer bags may finance terror.

"That's serious stuff, and anybody who buys a knock-off bag should really think about that -- that that's what you're contributing to," Kolsun said.

The purse sellers that 12 News investigated likely had no idea where the money might have gone, Henry said.

"I'm the housekeeper, there's no one here right now," when Henry knocked at the Brookfield door.

"Well, it looks like everybody's here right now. There are a number of cars in the driveway," Henry responded.

"Do you know where this money goes?" Henry asked the Elm Grove seller.

"I don't know," the woman responded.

"Are you aware of the Genovese crime family is engaged in counterfeit and providing this kind of stuff?" Henry asked.

"No, I'm not," the woman said.

"Do you know this kind of counterfeit was found to have funded the 1993 World Trade Center bombing?" Henry asked.

"I'm not sure," the woman answered.

"Does that concern you?" Henry asked.

"Yes it does, but I'm going to leave," the seller said.

"It's not just about a knock-off Burberry purse or a knock-off Polo T-shirt, it's about a much bigger problem, and when you contribute to that problem by holding a purse party, going to a purse party and buying a couple of bags, then you're contributing to the bigger evil," Kolsun said,

Federal officials and anti-counterfeit investigators continue to link the sale of fake goods to organized crime.

Counterfeiting had been a relatively low police priority, but in this era of homeland security that appears to be changing.

As for the Milwaukee-area purse sellers, it's unlikely they were aware of the link, Henry said.

Still, anti-counterfeiters like Kate Spade's attorney vow to shut them down by either pressing criminal charges or a lawsuit.

How do you know if you're buying the real thing?

If you can peel off the label, it's a fake.

The real thing will have a tag indicating where it was made.

Real designer handbags are sold at either company stores or major department stores, not at home parties or on the street.

The bags 12 News bought for its research will be donated to a Milwaukee women's shelter -- once the designer labels are taken off.

In most major cities in the world, there is an active and highly profitable shadow economy in phony consumer goods that generates (in some estimates) upwards of 500 billion dollars a year. If have ever been down to "Counterfeit Alley" in midtown Manhattan, you have seen one of the biggest counterfeit marketplaces in the world.

While many of us spend our waking hours lusting after the latest fashion designs from our favorite designers, there are a lot of people out there who purchase knock-off or phony items without fully appreciating the consequences.

I recently read a book called "Knockoff", written by a fellow named Tim Phillips. It was an insightful read, with a number of interesting and often disturbing ideas presented. I was particularly interested in the section he devoted to the trade in phony luxury items such as designer handbags. These days, it seems I can't go anywhere without seeing somebody carrying a fake Prada or Gucci purse. Personally, I have always resisted the urge to purchase a counterfeit purse. I have avoided the temptation mainly because such an action only undermines an industry I have grown to love. When one considers the price of some of the higher-end purses, it should come as no surprise that some people purchase fakes.

What will surprise you is the discovery that their money is supporting future terrorist attacks in America and abroad. This book has confirmed my belief in supporting legitimate companies. Have you ever stopped to consider where the money you spend on fake consumer products ends up? This book will provide you with some frightening insights. The "black market" in counterfeit consumer goods provides incredible resources for criminal organizations, and these organizations certainly do not have the public interest at heart.

One of the most disturbing ideas in the book was the suggestion that terrorist organizations, working with organized crime groups, use the profits gained from these illegal sales to support future attacks. I could not sleep at night if I thought I was supporting terrorist campaigns to maim and kill innocent civilians in America, or anywhere else for that matter. I am a firm believer in being a conscientious shopper, and supporting companies that are trying to make the world a better place. I will gladly pay three times the price of a phony purse, to ensure that my money is not supporting terrorism. Check out "Knockoff" when you have a chance. It is a real eye-opener.

Short note about the author

Cathy Feldman always wanted to be a famous supermodel. When she is not fantasizing about strutting down the runway with her favorite Gucci purse, she writes for Designer Handbags ? an online designer handbag resource, with extensive information on real Louis Vuitton Purses, Cole Haan Handbags, Diesel Purses and more.

On a cool August evening, my family and I visited the preppy town of Mill Valley, California, outside San Francisco. In the town square was an all-American sight: a couple of kids behind a card table selling homemade lemonade. My six-year-old wanted some, so I gave her a quarter and sent her over to the booth. After a few minutes, I joined the kids and noticed that one, a cute eight- or nine-year-old girl with a blonde blunt cut, had a little Murakami pouch slung over her shoulder.

"Nice handbag," I said to her.

"It's Louis Vuitton," she responded proudly.

"No," I thought to myself as I gave it a good look-over. "It's a counterfeit Louis Vuitton. And it was probably made by a Chinese kid the same age as you in a slum halfway around the world."

Though the fashion business has muscled up its fight against counterfeiting, with many brands investing millions of dollars each year, the battle is ongoing. Since 1982, the global trade in counterfeit and pirated goods has grown from an estimated $5.5 billion to approximately $600 billion annually. Experts believe that counterfeiting costs American businesses $200 billion to $250 billion annually and is directly responsible for the loss of more than 750,000 jobs in the United States.

What's counterfeited? Everything. A couple of years ago, a counterfeit investigator discovered a workshop in the Thai countryside that produced fake versions of the classic Ferrari P4. Ferrari itself originally made only three P4s back in 1967. The Food and Drug Administration has said that counterfeit medicine could account for upwards of 10 percent of all drugs worldwide. Unknowingly taking a fake version of your medicine could have horrific effects on your health. European Union officials have seen a dramatic rise in the seizure of counterfeit personal-care items such as creams, toothpastes, and razor blades. The television series Law & Order: Criminal Intent recently highlighted this problem in an episode in which several children died after ingesting counterfeit mouthwash that had been made with a poisonous chemical found in antifreeze. "There have been counterfeit perfumes tested by laboratories that have found that a major component was feline urine," says Heather McDonald, a partner at the law firm Baker Hostetler in New York who specializes in anticounterfeiting litigation. Counterfeit automotive brakes made with compressed grass and wood have been found in U.S. stores.

One of the primary reasons counterfeiting keeps flourishing is that, as the little girl in Mill Valley proved, people keep happily buying fakes. According to a study published last year by the British law firm Davenport Lyons, almost two thirds of U.K. consumers are "proud to tell their family and friends that they bought fake luxury [fashion items]." And according to a 2003 survey carried out by Market & Opinion Research International in Great Britain, around a third of those questioned would consider buying counterfeits. Why? Because we still think of counterfeiting as a "victimless crime." Buying a counterfeit Vuitton bag surely doesn't affect the company, we reason. The parents of that Mill Valley girl probably wouldn't have invested in a real Vuitton Murakami for her, so it wasn't a loss of sales for the company.

But the reality is that we're all victims of counterfeiting, whether from the loss of jobs or of tax revenue that could fund our schools and our roads, or because by buying counterfeit goods, we are financing international crime syndicates that deal in money laundering, human trafficking, and child labor. Each time I read the horrid tales about counterfeiting from my book, Deluxe: How Luxury Lost Its Luster--like the raid I went on in a clandestine factory in the industrial city of Guangzhou, China, where we found children making fake Dunhill and Versace handbags--audience members or radio listeners tell me they had no idea it was such a dark and dangerous world and that by purchasing these goods they were contributing personally to it. Then they invariably swear that they will never knowingly buy another fake good.

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Brands as well as law enforcement have cracked down on the counterfeit business severely in the past few years, here in the U.S. and abroad. I saw a difference in Hong Kong, for example: A decade ago, you could buy a fake Vuitton handbag or Burberry knapsack for a couple of bucks from a vendor in the subway; today you can't even find them on the street. There are still dealers, but now they lurk in doorways, whispering, "Rolex? Chanel?" and you hurry down dark streets to armored hideaways to close the deal. To say it's scary is an understatement. "If you can keep the stuff out of the public eye, you are halfway to winning the battle," McDonald says. "The brands that are doing aggressive enforcement are hidden in back alleys and not on the street corners."

As long as there is a demand, however, there will be a supply. Traditionally, the supply chain worked like this: An order of 10,000 handbags would be divided into 10 groups of 1,000 to be made--often by children--in hidden workshops in Guangzhou. Once completed, the items would be wrapped up and deposited in a neutral place, like the courtyard of a local school, where they were picked up by a local transporter, often simply a guy on a bike with a cart. The transporter delivered the pack-age to the wholesaler, who would take it to another neutral place to be picked up by the international shipping agent and put in a shipping container. The goods were often packed in shipments of foodstuffs or legitimately manufactured clothing to escape detection by receiving customs officials. Each time the goods changed hands, the prices doubled. All transactions were done in cash.

But as fashion companies grew wise to the process and went after the sources in China, leading to raids on workshops and busts at ports, the counterfeit-crime rings came up with new routes to supply fake goods: produce them, or at least finish them, in the destination country. Law enforcement witnessed this firsthand during a big bust this past October. The New York Police Department raided a commercial building in Queens, arrested 13, and seized around $4 million in counterfeit apparel that carried the logos of major brands including Polo, Lacoste, Rocawear, the North Face, and 7 for All Mankind. Officers also found a stash of fake labels and buttons for Tommy Hilfiger, Nike, and Adidas as well as embroidery machines. Investigators believe that the site was a finishing facility. Workers took generic items that may have been imported legally and sewed on fake logos and labels, turning the items into counterfeit branded goods.

Another trick is to import counterfeit items that are hiding under a legitimate face. "Some of the counterfeiters put a whole separate coating on the bag, and you peel it off like contact paper to see the logo fabric underneath," McDonald tells me. "We seized a load of Lacoste men's dress shirts, and on the left breast pocket, where the alligator should be, there was a little generic label that read, 'Metro.' When you pulled out the threads and removed the Metro label, you found the alligator."

There's another method that is catching on rapidly: counterfeiters who will take a legitimate logo, tinker with it slightly, apply for a trademark for the new design, then import those items under a false pretense of legality, showing the official application paperwork as their defense. For example, a company takes the Ralph Lauren polo-horse-and-rider logo and puts the polo mallet down instead of up in the air. The counterfeiter files a trademark application with the U.S. Patent and Trademark Office and gets a document that states the application is pending. "It's a legitimate document fraudulently secured, and the application will probably be rejected in six months," the intellectual-property counsel for a luxury brand explains to me. "But between now and then, the customs agents will approve the importation of the items--believing, incorrectly, that the pending application proves the importer must have a legitimate right to the trademark."

By the time the brand realizes what's going on, the lawyer says, thousands of items will have been imported and the counterfeiter will have "made millions" and fled. Luxury companies discovered one operation using this technique about two years ago, and now several more have popped up. "We must be doing a good job, since counterfeiters are looking for such complicated ways to get in," the lawyer says.

People often ask me, "How do you know it's fake?"

Well, if it's being sold at a fold-up table on a sidewalk corner or on the back of a peddler on the beach, chances are it's fake. Or if it's at a flea market. Or a church fundraiser. Or in Wal-Mart or Sam's Club or other discount mass retailers. In June 2006, Fendi filed suit in a U.S. district court against Wal-Mart Stores, Inc., asserting that the world's largest retailer was selling counterfeit Fendi handbags and wallets in its Sam's Club stores. For example, one bag was offered for $295; the legitimate Fendi handbag of the same design normally retailed for $925. In the suit, Fendi stated that Wal-Mart has never purchased Fendi products and never checked with Fendi to see if the items were real. The case was settled out of court last summer after Sam's Club agreed to pay Fendi an undisclosed sum.

If you want to guarantee that your luxury-brand purchases are legitimate, don't shop in wholesale markets like those in Chinatown in Manhattan or Santee Alley in Los Angeles. "We'll go on raids on Chinatown wholesalers, and we'll find five or six suburban women standing there--customers," New York security expert Andrew Oberfeldt has told me. "We'll say to these women, 'The dealers take you down dark corridors, through locked doors. The police say, "Open up!" The lights are turned out and everyone is told to be quiet. At what point did you realize that something was amiss here?'"

If you find an item for sale on the Internet for a price so low that it seems too good to be true, it probably is too good to be true. Last fall, the U.K.-based Authentics Foundation, an international nonprofit organization devoted to raising public awareness about counterfeiting, launched myauthentics.com, a Web site that helps Internet shoppers determine if the products they are eyeing on the Web are real. It includes blogs and forums, news, myths, and tips on how to spot fakes; eBay now has links to the site. EBay also works with brands in its VeRO (Verified Rights Owner) program to find out if the items for offer on the site are genuine. If the brand deems a particular item to be counterfeit, the sale will be shut down. However, not all online sales sites have such verification processes in place. Besides, counterfeiters are known to post photos of genuine items to sell fakes. So as the old saying goes, buyer beware.

Of course, the best way to know if you are buying a genuine product is to buy it from the brand, either in directly operated boutiques or in a company's shop in a department store. If you are curious about the authenticity of a used Vuitton item you purchased at a vintage shop or online, you can always contact one of the brand's boutiques.

Most important, we need to spread the word on the devastating effects counterfeiting has on society today. I didn't tell the girl in Mill Valley that her bag was fake. It wasn't her fault her family had given it to her. But if I had met her parents, I would have said something. Awareness is key. Counterfeiting will never go away--it's been around since the dawn of time--but we can surely cut it down to size if we just stop buying the stuff. Without the demand, the supply will shrink. It's up to us.

RELATED ARTICLE: How not to buy a fake

* Don't buy a luxury bag from a discount store like Wal-Mart or Sam's Club.

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* Don't shop wholesale markets like those in Chinatown in Manhattan.

* Don't buy online for prices that are significantly lower than normal.

* The best way to guarantee that you are not buying a fake is to purchase directly from the brand.

Re: Why counterfeit bags are BAD - a guide.

The real cost of fake goods: some of the profits from counterfeiting support criminal activities, and even terrorism.

Publication: New York Times Upfront

Publication Date: 01-OCT-07
Author: Thomas, Dana

COPYRIGHT 2007 Scholastic, Inc.

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Fashion is easy to copy: Counterfeiters buy the real items, take them apart, scan the pieces to make patterns, and produce almost-perfect imitations. According to the Global Anti-Counterfeiting Group in Paris, at least 11 percent of the world's clothing is fake.

As soon as a handbag from Prada, Louis Vuitton, or Gucci hits big, counterfeiters around the globe churn out fakes by the thousands. And they have no trouble selling them. Shoppers descend on Canal Street in New York, Santee Alley in Los Angeles, and flea markets around the country to pick up fakes for one-tenth the legitimate bag's retail cost.

Most people think that buying fake goods is harmless. But counterfeiting rackets are run by crime syndicates that also deal in narcotics, weapons, child prostitution, human trafficking, and terrorism. Ronald K. Noble, the Secretary General of Interpol. (the international police organization), says that sates of counterfeit goods have helped finance groups associated with Hezbollah, which the U.S. government considers a terrorist group; paramilitary organizations in Northern Ireland; and a leftist guerrilla group in Colombia.

Sales of counterfeit T-shirts may have helped finance the 1993 World Trade Center bombing, according to the International Anti-counterfeiting Coalition. "Profits from counterfeiting are one of the three main sources of income supporting international terrorism," says Magnus Ranstorp, a terrorism expert at the University of St. Andrews in Scotland.

Most fakes are produced in China. Children are sometimes sent off or even sold by their families to work in factories that produce counterfeit goods.

When I accompanied Chinese police officers on a factory raid in Guangzhou, we found two dozen children, ages 8 to 13, gluing and sewing together fake luxury-brand handbags. The police arrested the owner and sent the children out. Some punched their time cards, hoping to still get paid. (The average Chinese factory worker earns about $120 a month; the counterfeit factory worker earns half that or less.)

What can we do to stop this? Much like the war on drugs, we must go after the source: the counterfeit manufacturers. Makers of luxury goods also need to teach consumers that traffic in fake goods has many victims. But most companies refuse to speak out about counterfeiting.

So it comes down to us. If we stop knowingly buying fakes, the counterfeiters wilt go out of business. Crime syndicates will have far less money to finance illicit activities and terrorist plots. And the children? They can go home.

Dana Thomas, a correspondent for Newsweek, is the author of "Deluxe: How Luxury Lost Its Luster."